U.K. Supermarket Chains Feel the 'Aldi Effect'

Discounters Are Seeing Sales Gains as Shoppers Deal With Credit Crunch

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LONDON (AdAge.com) -- U.K. supermarket chain Asda, owned by Wal-Mart Stores, is using the credit crunch as an opportunity to demonstrate its thrifty credentials and is dropping its usual celebrity endorsements from its marketing plans in the process.
George Ad

The first 'real' people to appear in a major advertising campaign for Asda's clothing range, George, are three female health-care workers.

Three female health-care workers will be the first "real" people to appear in a major advertising campaign for Asda's clothing range, George, that was created by Publicis Groupe's Fallon, London. Previous Asda spokespeople have included Sharon Osbourne (wife of Ozzy) and British actress Julie Walters.

'It feels wrong'
"It feels wrong to spend money on a celebrity endorsement when times are tough and money is tight," Fiona Lambert, George brand director, said in a statement. "What we have done is saved money and worked out how to pass these savings on to our customers by lowering our prices and improving quality and design."

Asda, the U.K.'s second-biggest supermarket chain after Tesco, is among the few benefiting from the credit crunch. While some traditional rivals are losing market share to deep discounters such as Lidl and Aldi, which rely heavily on their own private-labels brands, Asda is still gaining ground. New data from TNS Worldpanel shows Asda at its highest-ever share of U.K. grocery market, 17.3%, as sales were up by more than 9% in the past year.

German-based discounter Lidl, with 7,000 stores in Europe, has seen sales go up 11% in the U.K. this year, while another German retailer, Aldi, which has 7,500 stores, mostly in Europe, has seen the most marked upturn, reporting U.K. sales up 21% this year.

Coming to Florida
This rush to discount retailers by middle-class consumers has become known in the U.K. as the "Aldi effect," as shoppers increasingly focus on price and the recent obsession with healthy eating and the quality and provenance of food have been cast aside. The "Aldi effect" may be coming to the U.S., too. The discounter has 900 stores in 28 states and will make a big push to enter Florida this month, with 24 stores scheduled to open across the state in less than two months starting Sept. 25.

Alastair Morton, an analyst at WPP Group's Henley Centre HeadlightVision, has looked closely at the Aldi effect and found that 56% of U.K. adults say they will be more likely to go to a discount retailer in the next 12 months.

He pointed out that over the past five years, discounters such as Aldi and Lidl have added branded goods, which now comprise as much as 30% of the product assortment. "So switching to these retailers need not mean buying different products," Mr. Morton said. "People's initial response to downturn is to buy the same things cheaper rather than buy fewer or different things. After this, they buy less or cut out treats or luxuries."

Indeed, pricier retailers such as Marks & Spencer are suffering. Marks & Spencer's upmarket convenience food chain has seen sales fall by 5% in the last three months. Executive Chairman Stuart Rose said in a statement, "Pressure on consumer spending and increased competitor pricing and promotional activity, coupled with changes in consumer buying patterns, have resulted in a significantly weaker performance."
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